Guillotine over Xbox: The Terrifying Layoffs of 3,200 Jobs and Sinking Their Own Studios for $200

If you thought the era of bloody layoffs at Xbox was over, think again. Microsoft has just announced that as part of a so-called 'restructuring', it will lay off a staggering 3,200 employees across various Xbox departments. And that's just the beginning. As part of these 'necessary changes', Xbox has decided to part ways with four talented studios that were its own - Double Fine, Compulsion Games, Ninja Theory and Undead Labs. They're trying to reassure us that these studios won't disappear, just transition to 'new management' or be sold. But 'new management' is often a euphemism for 'the studio no longer exists'. Especially when the industry is on the brink of collapse.

But that's not all. According to Eurogamer.net, of the initial wave of 1,600 layoffs, a whopping 320 are from the Xbox Games Marketing team. Is it just marketing? Or is there a deeper cut hidden behind it. Because if Xbox wants to 'focus', it's hard to see what games are supposed to be made without, to put it mildly, teams. Plus, as Kotaku reports, at Obsidian, the studio behind hits like The Outer Worlds and Avowed, a quarter of the team - about 60-70 people - will lose their jobs. Further proof that no team is safe.

Key Facts

• Xbox lays off 3,200 employees as part of 'restructuring'.
• Four development studios are leaving Xbox: Double Fine, Compulsion Games, Ninja Theory, Undead Labs.
• Xbox's Asha Sharma admits the current Xbox business model is unhealthy.
• Arkane Lyon may be the next studio on the chopping block.
• No currently announced games have been officially cancelled.
• Obsidian studio loses 25% of staff - about 60-70 people.

In this bloody mess, there's no room for sentiment. Xbox, like many other giants, is trying to save its skin by cutting costs. Asha Sharma's talk of 'unhealthy business health' sounds like an empty mantra today. After all, how much can you squeeze out of employees before talent starts leaking out? And we can't forget that behind each of these layoffs and 'restructuring' are people - gaming enthusiasts who have lost their jobs in the industry they love. In Obsidian's case, those losses are all the more painful because it's a team with an unquestionable track record - responsible for cult classics like The Outer Worlds or the recently well-received Avowed.

Turning studios 'independent' is also often a euphemism. When a large studio is 'liberated', it often disappears into the void. Or gets taken over by another predator who doesn't necessarily care about their legacy. And you can't help but notice that in the background, the dreams of gamers who were counting on more hits from these very teams are also going up in smoke. Xbox tries to reassure us that 'all members of the core team' are doing well, but it's like saying the ship survived the disaster while the rest of the passengers drowned. Meanwhile, in practice, as with Obsidian, even the 'survivors' lose the color of their teams - experienced seniors are being laid off, and the future of ambitious projects is in question.

Interestingly, Asha Sharma promises that Xbox won't get smaller - just more 'focused'. But does focusing on 'shareholder value' mean better games for gamers? Often not. For us, hardcore gamers, what matters is that games are good and valuable - not to consolidate financial results. Xbox wants to play in the league with Activision and Sony, but instead of investing in creativity, it cuts off 'less profitable' pieces. The example of Obsidian shows that these cuts don't even spare acclaimed teams. It's a clear signal that 'focusing' means reducing intelligent risks and investments in unique visions.

It's also worth remembering that AAA games in 2026 already cost almost $400. This price cannot be sustained without huge, often disproportionate to quality, investments. If Xbox is pulling out of funding ambitious projects, it's a sign of one thing: priorities are elsewhere. Not in games, but in financial reports. Meanwhile, the market demands more creativity, not less.

To cap off this dark picture - Asha Sharma says Xbox wants to be a place where a billion people 'play and create'. It's a beautiful dream, but it can't be realized without the teams that create these games. Today, Xbox has cut through these teams like a guillotine. And let's not pretend - for us, hardcore gamers, this is just disgusting. Especially when these cuts affect teams as deserving as Obsidian, which has been one of Xbox's pillars since its acquisition in 2018.

Have any games been cancelled?

For now, Xbox has assured that none of the currently announced games have been cancelled. But it's hard to say how this will change as further cuts begin.

What are the consequences for Obsidian studio?

Obsidian studio will lose about 25% of its workforce, which is about 60-70 people. Work on Grounded 2 and DLC for The Outer Worlds 2 will continue, but the future of other projects is unclear.